Incident: The company released its 2024 mid-year report. In the first half of 2024, the company's revenue was 0.4 billion yuan (-2.4%), net profit attributable to mother was 85.749 million yuan (-21.4%), after deducting non-return net profit of 84.385 million yuan (-16.8%).

Single Q2 achieved revenue of 0.21 billion yuan (-2.4%), net profit attributable to mother of 40.281 million yuan (-29.4%), after deducting non-attributable net profit of 40.948 million yuan (-25.1%).

The three core products have broad market prospects and provide the company with stable cash flow. The company's core sales drug “Aitingjiu” dapoxetine hydrochloride tablets, gastrointestinal pills, and voritine are well known in the segment, maintaining a good market competition pattern. By field: 1) Health medication for both sexes achieved sales revenue of 0.13 billion yuan (-9.4%). 2) Gastrointestinal medication achieved sales revenue of 93.108 million yuan (-3.4%).

3) Ophthalmic drugs achieved sales revenue of 87.259 million yuan (+4.3%).

Active promotion of products under development will gradually enrich the product structure. R&D investment of 51.261 million yuan (+41.3%) in the first half of 2024. 1) Gender health: Self-developed sildenafil citrate tablets have obtained registration approval, and finasteride tadalafil capsules, minoxidil tablets, etc. have been registered.

2) Gastrointestinal medication: Actively promote the domestic registration and approval process for gastrointestinal correction pills and the implementation of production in Taiankang, Anhui, and it is expected that domestic production approval will be implemented in 2024. 3) Ophthalmic medication: Pilocarpine hydrochloride eye drops completed the first phase III clinical trial enrollment in June 2024. It is expected that clinical trials will be completed within 2024 and a marketing license application will be submitted in the first quarter of 2025. 4) Laying out the field of chronic dermatology: The global innovative small-molecule drug CKBA vitiligo is undergoing phase II clinical trials. More than 50% of the subjects have been enrolled, and it is expected that patients will be enrolled in 2024.

Investment suggestion: The market space for the company's core products is broad, and the product hierarchy under development is reasonable. Considering the extensive marketing network and sales promotion experience, we forecast net profit to the mother for 2024-2026 of 0.213/0.282/0.367 billion yuan, corresponding to the PE valuation 25.1/19.0/14.6 times. Maintain a “buy” rating.

Risk warning: operating risks of agency operations; increased risk of market competition; risk of new drug development falling short of expectations, etc.